Moldova ranks 120th out of 198 countries in Transparency International’s 2019 Corruption Perception Index, indicating that high-levels of corruption are perceived to take place in Moldova. Its overall score on the Index has also declined over time since 2012, indicting a worsening situation.1 Moldova ranks 71 out of 141 on the Basel Institute’s Anti-Money Laundering Index 2020, indicating a moderate risk of money laundering.2
In the last few years, Moldova has seen massive corruption at the highest government levels. Acts of corruption have been de facto facilitated by the Moldovan state through some of its institutions, destroying the country’s fragile credibility before its international partners and its own citizens.3 Once acclaimed as the Eastern Partnership good student, holding ”the highest mark for deep and sustainable democracy”,4 Moldova became a captured state and a regional security threat for the EU.5
Although corruption was and is widespread in Moldova, two cases have shocked the Moldovan public and severely damaged the country’s image and credibility: the Russian Laundromat and the theft of the USD 1 billion. These acts of grand corruption have turned the country towards kleptocracy, and in just a few years, the country has seen a dramatic backslide in democratic standards, freedom of expression, freedom of the mass media, freedom of assembly and especially peaceful protest. In the wake of this, the Moldovan government has also passed a law that has decriminalized several economic crimes.6
Asset recovery in Moldova
Moldova and the Russian Laundromat
Moldova was a central piece in the Russian Laundromat – a massive money laundering operation in EU jurisdictions between 2010 and 2014,7 originating in Russia.8 Moldovan judges overnight legitimized fake debts of Russian companies in favor of fictitious companies registered in the EU, with Moldovan citizens acting as proxies (sometimes without suspecting it). The involvement of Moldovan citizens allowed the „debts” to be processed by the Moldovan court system. The total amount of the money laundering operation is believed to be over USD 80 billion. USD 22 billion passed through the Moldovan scheme alone. 16 Moldovan judges were involved in the laundromat and while all of them were briefly detained for one month in 2016, they were subsequently released. Most of the judges resigned or were suspended, two judges have since died, and one has fled the country, but none of the judges were convicted.9 In fact, no high-ranking public servant or official who had responsibility to act to prevent money laundering has been convicted until now.
Moldindconbank, a commercial bank regarded as the hub of the entire operation in Moldova, suspected of laundering USD 21 billion through Moldova and registering revenues from this activity, has continued to work undisturbed.10 The authorities have not attempted to recover any assets of illicit origin from Moldindconbank. In comparison, Danske Bank has been cooperating in the investigations, and has forgone its profits registered from the Laundromat in Estonia.11 One decade since the start of the operation, the criminal investigation in Moldova is stagnant.
The Billion Dollar Bank Theft
In 2014, approximately one billion USD disappeared overnight from three Moldovan banks acting in unison (Unibank, Banca Socială and Banca de Economii), all owned by Ilan Shor either directly or through proxies.12 The National Bank of Moldova (NBM) acted quickly to bail out the three banks by allocating money from the national foreign currency reserves. At the time, the NBM currency reserves were around USD 2.8 billion. A third of the Central Bank currency reserves were loaned to the Ministry of Finance which used the funds to cover the hole within the banking system. In spite of the bailout, the banks went bankrupt anyway. Two years later, without any wider consultations, the Government approved legislation according to which the theft will be covered by the taxpayer in the course of the next 25 years.13
The main criticism towards this decision was the lack of a credible investigation, the lack of asset recovery and the fact that no one was punished for the crime. The publishing of the Kroll-2 report14 by an independent auditing company revealed that politicians in power at the time of the theft and their business partners were also suspected as being the main beneficiaries of this crime, namely Vlad Plahtoniuc, Vlad Filat and Ilan Shor.15 A parliamentary committee report conducted in 2019 led to similar conclusions and pointed out to the undermining of investigations by the General Prosecutor’s Office in the period 2015-2019.16
14% of GDP was stolen overnight and the immensity of the crime outraged the population. Although some charges were raised, no one has been convicted. The trial of the MP Ilan Shor, who fled the country, has been ongoingly postponed, while a few of his alleged accomplices and members of the Moldovan Parliament were freed from criminal investigation by the Moldovan General Prosecutor on October 2nd, 2020.17
International Institutional Engagement
Moldova is a member of the FATF associated anti-money laundering committee “Moneyval” in the framework of the Council of Europe.18 Commitments on anti-money laundering, anti-corruption and asset recovery are also included in the framework of the EU Association Agreement and negotiations for EU membership.19
Moldova’s 2019 Evaluation under Moneyval found that the size of the banking sector (70%) of GDP was a particular concern for financial crime, as well as risks around money laundering stemming from the prevlance of the use of cash, the existance of opaque beneficial ownership structures and the existence of shell companies. It also highlighted that corruption is recognized as a major problem in the country.21
Moldova is an observer State to the Camden Asset Recovery Inter-Agency Network (CARIN). No international forums have included Moldova as a focus country.
- Transparency International, Corruption Perceptions Index 2019, https://www.transparency.org/en/cpi/2019/results/mda [accessed 30 October 2020].
- Basel Institute, Anti-Money Laundering Index 2020, https://baselgovernance.org/basel-aml-index/public-ranking [accessed 30 October 2020].
- Credible opinion polls such as the Barometer of Public Opinion suggest over 75% of the population do not trust the state: http://ipp.md/old/lib.php?l=ro&idc=156
- International Renaissance Foundation. (2013). European Integration Index for Eastern Partnership Countries. Retrieved from https://eap-csf.eu/wp-content/uploads/European-Integration-Index_2013.pdf
- Gherasimov, Ch. (2017). Moldova: The Captured State on Europe’s Edge. Chatham House. Retrieved from https://www.chathamhouse.org/expert/comment/moldova-captured-state-europe-s-edge
- European Commission. (2018). Second Report under the Visa Suspension Mechanism. Retrieved from https://ec.europa.eu/home-affairs/sites/homeaffairs/files/what-we-do/policies/european-agenda-migration/20181219_com-2018-856-report_en.pdf
- OCCRP. (2014). The Russian Laundromat. Retrieved from https://www.occrp.org/en/laundromat/russian-laundromat/
- The Guardian. (2017). Global Laundromat: how did it work and who benefited. Retrieved from https://www.theguardian.com/world/2017/mar/20/the-global-laundromat-how-did-it-work-and-who-benefited
- Ziarul de Gardă. (2019). Laundromat judges: three years with no sentence. Retrieved from https://www.zdg.md/investigatii/dosar/judecatorii-din-laundromat-de-trei-ani-fara-sentinte/
- OCCPR. (2017). The Russian Landromat Exposed. Retrieved from https://www.occrp.org/en/laundromat/the-russian-laundromat-exposed/
- ERR. (2018). Danske Bank to forgo Estonian money laundering profits. Retrieved from https://news.err.ee/847624/danske-bank-to-forgo-estonian-money-laundering-profits
- OCCRP. (2015). Grand Theft Moldova. Retrieved from https://www.occrp.org/en/investigations/4203-grand-theft-moldova
- BBC (2015). The great Moldovan bank robbery. Retrieved from https://www.bbc.com/news/magazine-33166383
- DW (2016). The Filip Government is enslaving its citizens – it has put the stolen billion on their shoulders. Retrieved from https://www.dw.com/ro/guvernul-filip-%C3%AE%C8%99i-%C3%AEnrobe%C8%99te-cet%C4%83%C8%9Benii-a-pus-miliardul-furat-pe-spatele-am%C4%83r%C3%A2%C8%9Bilor/a-35902157
- Kroll-2 report gives a detailed overview of a vast network of beneficiaries directly affiliated to governing politicians and companies registered under their names.
- TV8. (2019). Kroll 2 report uncensored. Information that has been hidden about the theft of the billion. Retrieved from https://tv8.md/2019/07/06/doc-raportul-kroll-2-fara-cenzura-ce-informatii-au-fost-ascunse-in-raportul-publicat-despre-furtul-miliardului/, RFI. (2019). Plahotniuc, Filat and Shor, beneficiaries of the bank fraud in Moldova. Retrieved from https://www.rfi.ro/politica-115210-plahotniuc-filat-si-sor-principalii-beneficiari-ai-fraudei-bancare-din-rmoldova, TV8. (2019). The published report of the parliamentary committee on the bank fraud. Retrieved from https://tv8.md/2019/10/17/doc-raportul-comisiei-parlamentare-privind-frauda-bancara-a-fost-publicat-deputatii-mai-vor-o-comisie-de-ancheta/
- Ziarul de Gardă. (2020). Tauber and Apostolova freed from criminal investigation in the bank fraud case. Retrieved from https://www.zdg.md/stiri/stiri-justitie/ultima-ora-tauber-si-apostolova-scoase-de-sub-urmarire-penala-in-dosarul-privind-frauda-bancara/
- See in particular Article 18 of the 2013 EU Association Agreement: “The Parties shall cooperate in order to event the use of their financial and relevant non-financial systems to launder the proceeds of criminal activities, as well as for the purpose of terrorism financing. This cooperation extends to the recovery of assets or funds derived from the proceeds of crime.” https://eur-lex.europa.eu/legal-content/ro/TXT/?uri=uriserv:OJ.L_.2014.260.01.0004.01.ENG
- Council of Europe, Moneyval, ‘Republic of Moldova: Fifth round Mutual Evaluation Report – Executive Summary, 2019